KUALA LUMPUR: AmResearch is maintaining its Hold call on KKB Engineering with an unchanged fair value of RM2.71 a share, which is a 5% discount to its sum-of-parts value of RM2.85 a share.

KKB posted net profit of RM33.5mil (+63% on-year) which was significantly below expectations, coming in at just 60% and 66% of its and consensus forecasts, respectively.

KKB declared a single-tier final dividend of 5 sen/share for a total payout for the year of 7.5 se a share – translating to a yield of 2.9%.

AmResearch said revenue amounted to only 85% of its forecast, with engineering jobs accounting for 75% of its estimate. The result was mainly affected by the lack of jobs, with the group having only secured RM50mil worth of projects up until the end of November 2013.

“This was before it had won a RM227mil contract with CMS Infra Trading Sdn Bhd for the additional supply of mild steel (polyurethane-lined) pipes and “pipe specials”. The 18-month project (until May 2015) should help boost its performance ahead,” it said.

For the year, the pipe manufacturing division performed better than expected, with revenue exceeding our estimate by 26% – helping to mitigate the lack of engineering jobs.

For 4QFY13, its net profit disappointed, at RM3mil, down by 58%-59% on-quarter and on-year as engineering jobs were are at the advance stages of completion, while costs were also higher.

“KKB says the group continues to explore all opportunities in its specialised and growing structural steel engineering services with an increased focus on energy-related projects and a long-term objective to participate directly in the oil and gas industry via its associate OceanMight Sdn Bhd and other strategic partners.

“We believe the group currently still has an outstanding order book of over RM300mil. We maintain our numbers for now, pending more concrete news of its bids and participation in the O&G fabrications jobs,” it said.